The corporation should also issue stock, file annual reports and hold yearly meetings to elect officers and directors, even if they're the same people as the shareholders.
So, while a sole proprietorship has the advantage of not being taxed separately, it has the disadvantage of making you lose more than you can ever imagine should you run into debt or legal hassles.
Tax law changes enacted by the Tax Reform Act of have caused many businesses currently taxed under corporate tax rules known as "C" corporations to reexamine their tax options. Banks and other financing sources are reluctant to make business loans to sole proprietorships.
Because this agreement is written by and for its own participants, and are, therefore, sometimes viewed with skepticism by the courts, the participants should decide whether certain or all disputes concerning the business be arbitrated.
In most cases, you'll have to depend on your own financing sources, such as savings, home equity or family loans.
If you go bankrupt, your creditors are entitled to size and sell your possessions - personal as well as business. There's no real reason to encumber yourself with all the reporting requirements of a corporation unless you're benefiting from tax implications or protection from liability.
Obviously, paying taxes as an S corporation may be more desirable under the new law.
The SBA provides examples of business plans for different types of companies, as well as a Business Plan Tool that guides you through each step of creating a plan.
The optimum choice depends solely on your personal situation.
Because laws are constantly changing, it is best to consult an attorney or accountant for the latest in regulations and requirements before you decide on the right business structure for you.
A "member" shareholder equivalent can be a person, partnership or corporation.